LANSING, MI -- Michigan residents buying a car, boat or recreational vehicle will see a tax break if they trade in an older model under legislation signed and celebrated Wednesday by Gov. Rick Snyder.

"It may be rainy out today, but it's a sunny day for Michigan, because we've got relief for taxpayers," Snyder said during a press conference inside a Shaheen Chevrolet showroom in Lansing.

"They deserve it."

The Republican governor was joined at the dealership by sponsoring Sen. Dave Robertson and Rep. Andrea LaFontaine, along with Senate Majority Leader Randy Richardville and House Speaker Jase Bolger.

The new law, years in the making, will exempt the value of a trade-in from the taxable purchase price of a new car, boat or RV.

Supporters say Michigan was one of just six states -- and the only in the Great Lakes region -- that applied its 6 percent sales tax to the full sale price even if the transaction included a trade-in, which put local dealerships at a competitive disadvantage.

"This is one of those rare instances where we have a win, win, win," said Richardville, calling the bill good news for manufacturers, dealerships and customers.

Michigan boat buyers will be able realize full savings beginning November 15, but the tax break on cars and RVs will start in December and be phased in slowly.

A car or RV buyer will initially be able to exempt a trade-in value of up to $2,000 from the sales tax. The maximum trade-in value will increase by $500 annually over the course of the next 25 years.

A customer who buys a car this year could save up to $120 with a trade-in. The maximum tax break will increase by $30 each year beginning in 2015.

Doug Fox, president of the Michigan Automobile Dealership Association, said customers looking for a new car should not wait for the tax exemption to take effect in December.

"Many, many dealers across the state have already started implementing a rebate or credit program for the trade-in," he said.

Gradual implementation is meant to limit the immediate impact on the state budget. The majority of sales tax revenue is automatically directed to the School Aid Fund, which is used to support K-12 education.

The current budget includes a $20 million cushion for tax relief that will cover current-year costs, but the Senate Fiscal Agency has projected annual revenue losses could eventually top $200 million. Supporters expect the new law to boost boat, car and RV sales, suggesting the economic activity could help offset any future revenue losses.

Michigan lawmakers have been batting around "sales tax on the difference" legislation for years, but they had been unable to finalize a deal until now. Snyder expressed concerns about the budget implications of a similar bill last session but said the phase-in period in the new law will give the state time to adjust.

The law also includes a provision that will halt the phase-in if lawmakers repeal the "Healthy Michigan" Medicaid expansion plan, one of Snyder's signature accomplishments that is expected to save the state money in initial years as a result of federal funding.

Jonathan Oosting is a Capitol reporter for MLive Media Group. Email him, find him on Google+ or follow him on Twitter.